We visited Prague in June 2008 and we loved it! We felt like we were walking around a fairy tale, because of the beautiful old Czech architecture.
We stayed at The Castle Steps, in the Juniper Apartment. We had originally reserved one of their cheaper rooms, which shared a bathroom with another room, but they gave us a free upgrade to a studio apartment with it’s own bathroom, and a refrigerator and small table and chairs. I found the Castle Steps by reading reviews on http://www.tripadvisor.com, and it seemed rather common for people to get these lucky free upgrades. They had friendly English-speaking staff and computers available for guest use in the main office.
If you stay out of the most obvious tourist areas, you can get good food at reasonable to inexpensive prices. We usually ate dinner in the Castle Quarter, since after a long day of wandering around we wanted to eat near where we were staying and then have a short distance to bumble home on a full stomach. We ate at Maly Buddha a couple of times. They had good vegetarian options and reasonable prices. We also ate several times at an Indonesian restaurant a bit farther up the hill from Maly Buddha. Unfortunately I don’t remember the name of the place (some internet sleuthing leads me to believe it may be called Sate Indoneska), but the staff were super friendly and there was vegetarian food that was both delicious and inexpensive.
Here are some more photos of beautiful Prague!